Invasion of the Drones: Do You Need Drone Insurance?

Transcription

1 Invasion of the Drones: Do You Need Drone Insurance? WHO S USING DRONES? Almost everybody * Law Enforcement * Real Estate * Construction * News Coverage * Agriculture * Search & Rescue * Patrol Flights * Mining * Railroads * Remote Medicine * Package Delivery * Wildlife Monitoring & Tracking * Hunting * Thermal Imaging *Restaurants for Table Service *Flare Stack Inspections *Bridge Inspections * Controlled- Access Operations * Photography Why You Need More Than a Standard Business Insurance Policy Neither standard business commercial general liability * policies nor homeowners policies * will protect you for drone operations. Drones * are classi9ied as aircraft by the Federal Aviation Administra- tion and they typically require aviation insurance. The cost is reaso nable, and people would be wise to purchase drone insurance. The FAA says drones used for commercial purposes must hold a Certi9icate of Authority. 25 near misses What Could Go Wrong? A drone could crash and hit people, an auto or a building. Pilots have reported 25 near misses with drones to the FAA. Invasion of privacy lawsuits are a possibility. Most drone operations are so new that it is dif9icult to determine the risks with certainty, says Doug Johnson, president of JSL Aviation Insurance, a division of J. Smith Lanier & Co. and an aviation specialist member of RiskProNet International, an association of independent insurance brokers in North America. If a construction company is building a power plant in a remote area and using a drone to inspect the roof, the risk is probably minimal. But let s say you re using a drone to inspect the windows in a 30-9loor skyscraper in the middle of a city, you lose radio contact, and the drone crashes. The conse- quences could be serious, he said. Risks still unknown Becomes Ubiquitous Drones are becoming ubiquitous. Many people fail to perceive them as a risk because nothing really bad has happened yet. But everything bad always happens at the worst possible time. If you do have a drone and it 9lies off on its own and injures someone, you ll be very glad if you have an insurance company on your side, he added. Invasion- of- privacy issues are a major unknown. The American Civil Liberties Union urges rules to avoid a surveillance society in which our every move is monitored, tracked, recorded, and scrutinized by the government. Although Congress has ordered the FAA to make it easier for law enforcement agencies to use drones, the proposal does not include privacy protections.

2 WHITE PAPER - INVASION OF THE DRONES PAGE 2 Some Examples of Companies Holding FAA Certificates As of the spring of 2015, only 69 companies had received a Section 333 Exemption, the technical term for FAA certification for commercial use of drones. The dominant categories are aerial photography or aerial inspections of facilities. Given the number of drones, it appears that many companies are unaware of the need for certification and insurance. Sky-Futures UAS, Inc. Oil and gas platform inspections on land and over water BNSF Railway Company Evaluation and analysis of railroad infrastructure and operations Quiet Creek Corporation - Mapping and precision agriculture operations State Farm Mutual Automobile Insurance Company - Roof inspections Chevron AS, Inc. Aerial imaging for safety and monitoring of controlled-access oil and gas facilities VDOS Global Flare stack inspection Asymmetric Technologies Bridge inspections Snaproll Media Closed-set filming SanDiego Gas and Electric Co. - Electrical grid Singer s Creations - Real estate photography Others are concerned about people who deliberately or inadvertently 9ly camera- equipped drones over their yards or outside their windows. Section 333 certification What the Federal AviaDon AdministraDon Requires If you sell real estate, for example, and you use a drone for aerial photography of clients properties, you are most likely operating legally in the eyes of the FAA as long as you don t charge clients speci9ically for the use of the drone. If you charge speci9ically for the use of your drone, such as taking aerial photos from a drone, the FAA says certi9ication is required under Section 333 of the FAA Modernization and Reform Act of Details are at legislative_programs/section_333/. Small drones What Are the FAA s Future Plans? The FAA hopes to have rules in place by the fall of 2015 for drones weighing 55 pounds or less. It uses the term UAS, or unmanned aviation systems. The following regulations are under consideration: The operator must always see and avoid manned aircraft. If there is a risk of collision, the operator must be the 9irst to maneuver away. Flights could go no higher than 500 feet and no faster than 100 mph. A small drone may not 9ly over people, except those directly involved with the 9light. Objects may not be dropped from the drones. The operator must discontinue the 9light when continuing would pose a hazard to other aircraft, people or property. The operator must assess weather conditions, airspace restrictions and the location of people to lessen risks if he or she should lose control of the UAS. Operators must stay out of airport 9light paths and restricted airspace areas, and obey any FAA temporary 9light restrictions. Operators would be responsible for ensuring that the drone is safe before 9lying, but the FAA is not proposing that small drones comply with current agency airworthiness standards or aircraft certi9ication. A pre9light inspection, including checking the communications link between the control station and the drone, could be required. Although the FAA is moving ahead, there are some who question its assertion that it has authority to regulate drones. As a result, some insurers are setting their own standards and requiring even more stringent rules.

3 INVESTOR WHITE PAPER NEWSLETTER - INVASION ISSUE OF THE N 3 DRONES FALL PAGE REDUCE WORKPLACE INJURIES USING DRONES Drones have enormous potential for reducing workplace injuries. For example, using drones to inspect radio and telecommunications towers could eliminate the need for workers to climb the structures. Ninety-five workers died climbing those towers from 2004 through 2012, the FAA said. One, for example, requires clients to keep logs of 9light and maintenance. This is an entirely new industry evolving at lightning speed, aviation specialist Johnson points out. The FAA, in contrast, is designed to move more slowly and take time to gather data. Is U.S. falling behind? FrustraDon with FAA Pace There is a growing frustration that the FAA is not keeping pace with the rapidly increasing use of drones. Amazon has contended that the U.S. is falling behind other countries in realizing the economic potential of drones, saying that one of its prototypes became obsolete while the company waited more than six months for a decision on whether it could conduct tests. The FAA rules are more restrictive than are the rules and approvals by which we conduct outdoor testing in the UK and elsewhere," an Amazon spokesman said in written testimony submitted to the Senate Subcommittee on Aviation Operations, Safety and Security. "Moreover, obtaining permission took far too long, and certainly much longer over half a year than it took in other countries." Amazon wants to use drones to deliver packages to customers. For larger drones, the FAA has set up six test sites, operated by research entities such as the University of Texas Corpus Christi, to help in developing rules and certi9ication standards. Liability and physical damage What Kind of Insurance Coverage Is Available? Drones are so new that the insurance industry is still familiarizing itself with potential issues, a spokesman for the New York- based Insurance Information Institute recently told Insurance Journal magazine. Here s what is currently available: Aircraft liability Physical damage coverage. Be sure to consider the value of ground support equipment. Products liability for manufacturers, retailers and repair facilities These coverages are expected soon: Chemical liability Leasing coverage for manufacturers Coverage for privacy claims Zurich Canada announced in April that it will offer an insurance package to cover corporate users of drones and plans to roll it out globally on a country- by- country basis, based on local demand and the sophistication of the regulatory environment governing drones in each country. According to Insurance Journal, Zurich s drone policy provides companies with both 9irst- and third- party coverage for a variety of risks. It includes the following provisions: First- party property coverage for theft or damage to the drone and any ground equipment used to operate it, or any electronics or components (payload) carried.

4 INVESTOR WHITE PAPER NEWSLETTER - INVASION ISSUE OF THE N 3 DRONES FALL PAGE Third- party liability coverage for property damage and bodily injury caused by the drone, premises liability at locations used in connection with scheduled aircraft, as well as medical expenses. Additional coverage extensions may include malicious damage, system hacking, and personal injury. New rules What s Ahead in Terms of Policies? As drones proliferate, so do concerns about their use and new regulations. Just this year the FAA banned drones at the 2015 Super Bowl, saying violators could face a jail sentence. The National Park Service has forbidden the use of drones in national parks as the result of a drone 9lying over a crowd of more than 1,500 people at Mt. Rushmore in City and regional parks across the country are considering prohibiting drones whose noise can interfere with the enjoyment of nature. Another possibility is setting aside speci9ic areas for drone use, just as there have long been speci9ic areas where radio- controlled model airplanes are allowed. Quite sophisticated Looking at Canadian RegulaDons Zurich talked about some of the Canadian regulations that could serve as a model for other countries.: Unlike many other countries around the world, the regulatory environment for the commercial use of drones in Canada is quite sophisticated. For example, in the United States, it can be very dif9icult to obtain a Certi9icate of Waiver or Authorization and Special Airworthiness Certi9icate from the Federal Aviation Administration for any non- military use for a drone. Growing public concern Looking at RecommendaDons in Europe Europe also is concerned about drones. The House of Lords EU Internal Market, Infrastructure and Employment Sub- Committee in March 2015 recognized growing public concern over the use of drones by private individuals, with little knowledge of aviation rules. It urged government agencies to take the following steps: Develop a shared manufacturing standard for drones, such as the CE marking, which sets standards for products sold in the European Economic Area. Create an online database of drone operations to track and manage drone traf9ic. The Committee expects that commercial operators could register their drones on an online database or app in the near future, and that in the longer term it would encompass leisure users as well. Widen the application of geo- fencing technology, which limits 9lights over high- risk sites. Create guidance for the police to enforce existing safety rules. UK s Civil Aviation Authority and the European Aviation Industry are working on regulations, and the British Airline Pilots Association has expressed concern about the possibility of large commercial drones 9ling alongside passenger aircraft. By contrast, Transport Canada has laid out very speci9ic guidelines for how to obtain a Special Flight Operating Certi9icate for commercial drone operations where the weight of the drone exceeds 25 kg, or where the drone weighs between 2.1 and 25 kg but the operation can t meet all the safety conditions for an SFOC exemption. The SFOC application asks for details such as the purpose of the operation, dates, times and locations of the 9lights, the boundaries of the area where the drone will 9ly, and safety plans. Generally speaking, Transport Canada forbids operation of drones over or within built- up areas of cities or towns. Additionally, the Canadian Privacy Commission has also explicitly stated that drone operations are governed by Canada s privacy laws, including the federal Personal Information Protection and Electronic Documents Act. Zurich plans to offer safety training and other risk management tools for using drones.

5 INVESTOR WHITE PAPER NEWSLETTER - INVASION ISSUE OF THE N 3 DRONES PAGE 5 Why now? Drones Are ProliferaDng Drones are proliferating, and the number of manufacturers is so large that exact statistics are hard to 9ind. The FAA projects that there will be 7,555 drones available for commercial use within the next 9ive years, according to Insurance Journal. The Teal Group, which analyzes the aerospace industry, predicts that the global market will almost double over the next 10 years to more than $91 billion, largely driven by expanding civilian use. National Park and Recreation Magazine estimates that about 200,000 drones are sold each year. They are a particular concern here because about 70 precent of the aviation in the world is in the U.S. The saying goes If it is Dull, Dirty or Dangerous, use a Drone. The continuing proliferation of drones is likely to affect virtually every industry. Original military models 1st Drones Were for Target PracDce Drones were developed in the early 20th century to be used as targets for combat practice. Early models did not have interactive capability. Today the term has come to mean any type of 9lying vehicle operated without a pilot on board. They are advanced versions of the radio- controlled model airplanes long operated as hobbies. (Proposed FAA rules would not apply to model airplanes, which already are regulated as long as they are operated for recreational purposes.) They difference is that modern drones have signi9icantly more capabilities in terms of the range they can 9ly and the missions they can perform. There are two basic kinds: an RPV or remotely piloted vehicle with a human in control at all times via satellite or line of sight and an autonomous drone preprogram- med to 9ly a mission and return. Some carry sniffers Most Used for Photography Although most drones are used for photography, they can also carry sniffers to search for chemical leaks. Whatever they do, they can be operated at a fraction of the cost of a manned aircraft. Some military models can 9ly more than 30 hours and thousands of miles. Some are as small as a hum- ming bird, and others, as big as a 747. Find a specialist What Should I Do Now? Talk to an insurance specialist such as JLS Aviation President Doug Johnson. To 9ind a specialist in other areas, contact RiskProNet International, an organization of leading independent insurance brokers, at JSL AVIATION 500 Plantation Park Drive Loganville, GA (678) Toll-Free (800) [email protected] JSL Aviation, one of the largest independent aviation specialty brokers in the Southeast, has been insuring aviation risks since We have established a strong presence in the marketplace which gives us the power to negotiate the broadest, most competitive terms available. We are a division of J. Smith Lanier & Co., established in 1868 and one of the nation s leading insurance brokerage, employee benefits and risk management consulting firms.